Private equity

The boom in private markets since the 2007-2009 financial crisis has been huge, mainly relying on very low interest rates to rack up debt on the companies purchased. After central banks around the world slashed interest rates to near zero in response to the 2008- 009 financial crisis, private equity embarked on its longest and most powerful boom. In 2021, the market’s zenith, a record $1.2tn in deals were struck, according to PitchBook data.

Economic slumps provide fresh blood for these vampires as small companies struggle in recessions. In 2008-9 slump and in the pandemic slump, private equity firms announced ‘approaches’ to more than twice as many listed companies as they had ever done previously. And private equity company, Bain Capital’s managing partner John Connaughton commented: ‘One of the most productive periods for us was after the global financial crisis.”

But now a series of rapid interest rate rises since 2022 has dried up much of the fresh blood that vampire PE funds need and many private-equity-backed companies are saddled with large debts and face much higher interest costs. Default rates are picking up and lenders are increasingly taking control of creditor companies at the expense of equity owners. 

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Over the last two decades, the vampires of private equity have gorged themselves on the profits of labour in the companies they have sweated, while avoiding sharing those profits with their investors or with governments through taxation. They engage in various forms of ‘financial engineering’ to increase their gains. And in doing so, they have leveraged key sectors of the economy into huge debt, at the expense of productive investment. Now rising debt servicing costs are adding to the risk of a major financial crash, acting as a stake through the heart of many of these vampires.

Ah, private equity; is there any bad situation you can't make much, much worse?

In the midst of an affordable housing crunch and with yearslong Section 8 voucher waitlists, manufactured homes tend to be a more affordable option compared with traditional site-built houses, particularly for seniors and low-income households. A factory-built home can be a steppingstone for families pursuing homeownership or the last stop before falling into homelessness. But advocates say manufactured housing is quickly becoming unaffordable as private equity firms buy up parks and raise rents. In some cases, it’s unclear who owns the lots, making it easier for maintenance problems to go unaddressed.

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A household that lives in a manufactured home may own the structure but rent the land on which it sits. For many, “mobile” may be a misnomer.

“It's difficult, expensive or outright impossible to move these homes and so residents are forced to tolerate escalating rents, arbitrary fees, lack of transparency in billing and failure to invest in the maintenance of park properties, all which contribute to their housing insecurity,” said Esther Sullivan, a professor of sociology at the University of Colorado Denver, at the Senate committee hearing.

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“It's really frustrating as someone who has spent time in social services for so long to not be able to help people, particularly when they're in your city and you should have some jurisdiction over situations like these, where the living conditions are compromising the residents’ health, safety and well-being. We should be able to do something and hold those people accountable,” said Warren City Council President Angela Rogensues, who spearheaded the nuisance complaint.

Rogensues told state lawmakers last month that many parks are in “tremendous disrepair.” She reported seeing residents dealing with rat infestation, trees growing through trailers, trip hazards and trailers filled with garbage in 2022. Rogensues said she reached out to city and state departments and was told they didn’t have jurisdiction over mobile home parks. The city cannot test to regulate the water once it enters the park, she said, meaning the owner is responsible for the water quality. 

“Renters of mobile homes and even owners of mobile homes do not fall into a category I can regulate or enforce,” she told lawmakers.